Another Banner Year for False Claims Act Recoveries Signals More of the Same for 2018

The Department of Justice (“DOJ”) reported $3.7 billion in False Claims Act (“FCA”) settlements and judgments for fiscal year 2017, the 8th straight year of 3-plus-billion-dollar recoveries and 700-plus new cases filed. Healthcare, mortgage, and procurement fraud once again dominated recoveries. This article analyzes DOJ’s FCA statistics, and includes our predictions for continued strong enforcement in 2018.

Healthcare matters comprised roughly two-thirds of recoveries, with $2.4 billion collected from drug companies, hospitals, pharmacies, laboratories, and physicians. The DOJ also vigorously pursued procurement fraud in 2017, recovering $220 million from defense contractors, and the majority of that amount, $208 million, came from qui tam cases in which the U.S. intervened. For instance, the DOJ settled two qui tam cases in which Department of Energy contractors agreed to pay $125 million to resolve allegations that they charged the government for deficient nuclear quality materials, services, and testing provided in conjunction with the design and build of a nuclear waste treatment plant. The settlement also resolved claims that the contractors used federal contract funds to pay for lobbying activities.

In another large procurement fraud settlement, the DOJ resolved claims brought in 2005 against a Department of Defense (“DOD”) contractor for $95 million alleging that the contractor knowingly overcharged the DOD under military food contracts and failed to pass through supplier discounts. The contractor also agreed to forgo administrative claims against the United States in which it sought $249 million.

As in previous years, the bulk of FCA settlements and judgments arose out of qui tam actions. Of the $3.7 billion recovered in 2017, $3.4 billion resulted from whistleblower lawsuits. Not surprisingly, government intervention in qui tam suits strongly correlated with recovery, with over $3 billion resulting from actions in which the U.S. intervened or otherwise pursued the matter. However, even in actions in which the U.S. declined to intervene, relators still recovered $426 million (the second-highest year on record).

What does the future hold? New filings continued apace in 2017, with 674 qui tam matters and 125 matters initiated by the DOJ. Roughly 50 lawsuits involved defense fraud allegations. So the pipeline of new matters remains full. And the Trump administration has expressed concern about fraud, waste, and abuse in government. In particular, Attorney General Jeff Sessions stated during his confirmation hearing that he fully supported FCA enforcement (while also commenting that FCA cases often remain under seal for a long time to the detriment of defendants). In later remarks, the Attorney General touted the successes of the DOJ’s “Health Care Fraud Takedown” program. So contractors should stay wary of FCA as a continuing minefield.

Our Government Contracts Practice

Blank Rome maintains a nationally recognized, multidisciplinary government contracts practice that represents contractors in all aspects of federal, state, and local procurement law—from contract formation through close-out. Our clients span the industry, from companies new to the public sector to those in the Fortune 500, and include leaders in the defense, professional services, information technology, maritime, aviation, healthcare, energy, and construction sectors... Read More

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